Question 1

The investment function slopes because there are investment projects that are profitable as the interest rate decreases.

Accepted Answer

A) upward; fewer 
B) upward; more 
C) downward;fewer 
D) downward; more 
A) upward; fewer 
B) upward; more 
C) downward;fewer 
D) downward; more

Question 2

Estimates by Goldin and Katz indicate that the financial returns of a year of college between 1980 and 2005.

Accepted Answer

A) increased. 
B) decreased. 
C) did not change. 
D) were negative. 
A) increased. 
B) decreased. 
C) did not change. 
D) were negative.

Question 3

At any particular point in time, the output of the economy:

Accepted Answer

A) is fixed because the supplies of capital and labor and the technology are fixed. 
B) is fixed because the demand for goods and services is fixed. 
C) varies because the supplies of capital and labor vary. 
D) varies because the technology for turning capital and labor into goods and services varies. 
A) is fixed because the supplies of capital and labor and the technology are fixed. 
B) is fixed because the demand for goods and services is fixed. 
C) varies because the supplies of capital and labor vary. 
D) varies because the technology for turning capital and labor into goods and services varies.

Question 4

In a classical model with fixed factors of production and flexible prices, the amount of consumption spending depends on , the amount of investment spending depends on , and the amount of government spending is determined .

Accepted Answer

A) the interest rate; disposable income; by tax revenue 
B) the real wage; the real rental price of capital; by factor prices 
C) labor's share of output; capital's share of output; by the interest 
D) rate disposable income; the interest rate; exogenously 
A) the interest rate; disposable income; by tax revenue 
B) the real wage; the real rental price of capital; by factor prices 
C) labor's share of output; capital's share of output; by the interest 
D) rate disposable income; the interest rate; exogenously

Question 5

In the classical model with fixed income, if the demand for goods and services is less than the supply, the interest rate will:

Accepted Answer

A) increase. 
B) decrease. 
C) remain unchanged. 
D) either increase or decrease, depending on whether consumption is greater or less than investment. 
A) increase. 
B) decrease. 
C) remain unchanged. 
D) either increase or decrease, depending on whether consumption is greater or less than investment.

Question 6

The property of diminishing marginal product means that, after a point, when additional quantities of:

Accepted Answer

A) a factor are added, output diminishes. 
B) both labor and capital are added, output diminishes. 
C) both labor and capital are added, the marginal product of labor diminishes. 
D) a factor are added when another factor remains fixed, the marginal product of the first factor diminishes. 
A) a factor are added, output diminishes. 
B) both labor and capital are added, output diminishes. 
C) both labor and capital are added, the marginal product of labor diminishes. 
D) a factor are added when another factor remains fixed, the marginal product of the first factor diminishes.

Question 7

An economy's factors of production and its production function determine the economy's:

Accepted Answer

A) labor force participation rate. 
B) budget surplus or deficit. 
C) population growth rate. 
D) output of goods and services. 
A) labor force participation rate. 
B) budget surplus or deficit. 
C) population growth rate. 
D) output of goods and services.

Question 8

In the classical model with fixed output, the supply and demand for goods and services are balanced by:

Accepted Answer

A) government spending. 
B) taxes. 
C) fiscal policy. 
D) the interest rate. 
A) government spending. 
B) taxes. 
C) fiscal policy. 
D) the interest rate.

Question 9

If the consumption function is given by the equation C = 500 + 0.5Y, the production function is Y = 50K0.5L0.5, where K = 100 and L = 100, then C equals:

Accepted Answer

A) 1,000. 
B) 2,500. 
C) 3,000. 
D) 5,000. 
A) 1,000. 
B) 2,500. 
C) 3,000. 
D) 5,000.

Question 10

The production function feature called "constant returns to scale" means that if we:

Accepted Answer

A) multiply capital by z and labor by z , we multiply output by z 1 2 3 
B) increase capital and labor by 10 percent each, we increase output by 10 percent. 
C) increase capital and labor by 5 percent each, we increase output by 10 percent. 
D) increase capital by 10 percent and increase labor by 5 percent, we increase output by 7.5 percent. 
A) multiply capital by z and labor by z , we multiply output by z 1 2 3 
B) increase capital and labor by 10 percent each, we increase output by 10 percent. 
C) increase capital and labor by 5 percent each, we increase output by 10 percent. 
D) increase capital by 10 percent and increase labor by 5 percent, we increase output by 7.5 percent.

Question 11

Assume that a firm is considering building a factory that will cost $5 million. It believes that it can get a profit from this factory of $600,000 per year for many years. The interest rate at which the firm can borrow money is 15 percent. After evaluating whether it should build the factory, the firm decides that it should:

Accepted Answer

A) not build because the rate of return on the factory is only 6 percent. 
B) not build because the rate of return on the factory is only 12 percent. 
C) build because the rate of return on the factory is 30 percent. 
D) build because the rate of return on the factory is 35 percent. 
A) not build because the rate of return on the factory is only 6 percent. 
B) not build because the rate of return on the factory is only 12 percent. 
C) build because the rate of return on the factory is 30 percent. 
D) build because the rate of return on the factory is 35 percent.

Question 12

Skill-biased technological change the demand for high-skilled workers, while the slowdown in the pace of educational advancement reduces the supply of skilled workers, resulting in relatively wages for skilled workers.

Accepted Answer

A) Aincreases; higher 
B) increases; lower 
C) decreases; higher 
D) decreases; lower 
A) Aincreases; higher 
B) increases; lower 
C) decreases; higher 
D) decreases; lower

Question 13

The real wage will increase if:

Accepted Answer

A) the supply of labor increases. 
B) the productivity of labor increases. 
C) the price of output increases. 
D) the supply of capital decreases. 
A) the supply of labor increases. 
B) the productivity of labor increases. 
C) the price of output increases. 
D) the supply of capital decreases.

Question 14

A production function is a technological relationship between:

Accepted Answer

A) factor prices and the marginal product of 
B) factors. factors of production and factor prices. 
C) factors of production and the quantity of output produced. 
D) factor prices and the quantity of output produced. 
A) factor prices and the marginal product of 
B) factors. factors of production and factor prices. 
C) factors of production and the quantity of output produced. 
D) factor prices and the quantity of output produced.

Question 15

If income is 4,800, consumption is 3,500, government spending is 1,000, and taxes minus transfers are 800, private saving is:

Accepted Answer

A) 300. 
B) 500. 
C) 1,000. 
D) 1,300. 
A) 300. 
B) 500. 
C) 1,000. 
D) 1,300.

Question 16

In the circular flow model, households receive income from the market and save through the market.

Accepted Answer

A) goods; financial 
B) factor;financial 
C) goods; factor 
D) factor; goods 
A) goods; financial 
B) factor;financial 
C) goods; factor 
D) factor; goods

Question 17

In examining the impact of fiscal policy, it is assumed that:

Accepted Answer

A) consumption, investment, and the interest rate are endogenous variables. 
B) consumption, investment, and the interest rate are exogenous variables. 
C) government purchases, taxes, and interest rates are endogenous variables. 
D) government purchases, taxes, and interest rates are exogenous variables. 
A) consumption, investment, and the interest rate are endogenous variables. 
B) consumption, investment, and the interest rate are exogenous variables. 
C) government purchases, taxes, and interest rates are endogenous variables. 
D) government purchases, taxes, and interest rates are exogenous variables.

Question 18

The circular flow model shows that households use income for:

Accepted Answer

A) consumption, saving, and factor payments. 
B) consumption, taxes, and factor payments. 
C) taxes, saving, and factor payments. 
D) consumption, taxes, and saving. 
A) consumption, saving, and factor payments. 
B) consumption, taxes, and factor payments. 
C) taxes, saving, and factor payments. 
D) consumption, taxes, and saving.

Question 19

The marginal product of capital is:

Accepted Answer

A) output divided by capital input. 
B) additional output produced when one additional unit of capital is added. 
C) additional output produced when one additional unit of capital and one additional unit of labor are added. 
D) value of additional output when one dollar's worth of additional capital is added.
Ç 
A) output divided by capital input. 
B) additional output produced when one additional unit of capital is added. 
C) additional output produced when one additional unit of capital and one additional unit of labor are added. 
D) value of additional output when one dollar's worth of additional capital is added.
Ç

Question 20

The marginal product of labor is:

Accepted Answer

A) output divided by labor input. 
B) additional output produced when one additional unit of labor is added. 
C) additional output produced when one additional unit of labor and one additional unit of capital are added. 
D) value of additional output when one dollar's worth of additional labor is added. 
A) output divided by labor input. 
B) additional output produced when one additional unit of labor is added. 
C) additional output produced when one additional unit of labor and one additional unit of capital are added. 
D) value of additional output when one dollar's worth of additional labor is added.

The investment function slopes because there are investment projects that are profitable as the interest rate decreases.

Estimates by Goldin and Katz indicate that the financial returns of a year of college between 1980 and 2005.

At any particular point in time, the output of the economy:

In a classical model with fixed factors of production and flexible prices, the amount of consumption spending depends on , the amount of investment spending depends on , and the amount of government spending is determined .

In the classical model with fixed income, if the demand for goods and services is less than the supply, the interest rate will:

The property of diminishing marginal product means that, after a point, when additional quantities of:

An economy's factors of production and its production function determine the economy's:

In the classical model with fixed output, the supply and demand for goods and services are balanced by:

If the consumption function is given by the equation C = 500 + 0.5Y, the production function is Y = 50K^0.5L^0.5, where K = 100 and L = 100, then C equals:

The production function feature called "constant returns to scale" means that if we:

Skill-biased technological change the demand for high-skilled workers, while the slowdown in the pace of educational advancement reduces the supply of skilled workers, resulting in relatively wages for skilled workers.

The real wage will increase if:

A production function is a technological relationship between:

If income is 4,800, consumption is 3,500, government spending is 1,000, and taxes minus transfers are 800, private saving is:

In the circular flow model, households receive income from the market and save through the market.

In examining the impact of fiscal policy, it is assumed that:

The circular flow model shows that households use income for:

The marginal product of capital is:

The marginal product of labor is:

The Science of Macroeconomics

The Data of Macroeconomics

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand II: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

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Exam 3: National Income Where It Comes From and Where It Goes

The investment function slopes because there are investment projects that are profitable as the interest rate decreases.

Estimates by Goldin and Katz indicate that the financial returns of a year of college between 1980 and 2005.

At any particular point in time, the output of the economy:

In a classical model with fixed factors of production and flexible prices, the amount of consumption spending depends on , the amount of investment spending depends on , and the amount of government spending is determined .

In the classical model with fixed income, if the demand for goods and services is less than the supply, the interest rate will:

The property of diminishing marginal product means that, after a point, when additional quantities of:

An economy's factors of production and its production function determine the economy's:

In the classical model with fixed output, the supply and demand for goods and services are balanced by:

If the consumption function is given by the equation C = 500 + 0.5Y, the production function is Y = 50K0.5L0.5, where K = 100 and L = 100, then C equals:

The production function feature called "constant returns to scale" means that if we:

Skill-biased technological change the demand for high-skilled workers, while the slowdown in the pace of educational advancement reduces the supply of skilled workers, resulting in relatively wages for skilled workers.

The real wage will increase if:

A production function is a technological relationship between:

If income is 4,800, consumption is 3,500, government spending is 1,000, and taxes minus transfers are 800, private saving is:

In the circular flow model, households receive income from the market and save through the market.

In examining the impact of fiscal policy, it is assumed that:

The circular flow model shows that households use income for:

The marginal product of capital is:

The marginal product of labor is:

The Science of Macroeconomics

The Data of Macroeconomics

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand II: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Filters

If the consumption function is given by the equation C = 500 + 0.5Y, the production function is Y = 50K^0.5L^0.5, where K = 100 and L = 100, then C equals: